The Political Economy of the Common Market in Milk and Dairy Products in the European Union. (FAO Economic and Social Development Paper - 142)

Paper prepared for the Agriculture and EconomicDevelopment Analysis DivisionFAO Economic and Social Department

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M-60 ISBN 92-5-104080-X

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This paper studies the policy delivery systems (PDSs) in the European Union (EU) for the implementation of the common dairy policy. It looks carefully at the stated aims and objectives of the Common Agricultural Policy (CAP) and the dairy policy at the PDS Itself and at the conduct of policy. The analysis is based on four objective performance criteria: effectiveness (in fulfilment of aims), efficiency enforceability and equity. Analysis of both the price support members. Three case-studies illustrate how the common policy had to be partially adapted in Italy and the United Kingdom because of differences In the market and processing industry structure and show how the high level of efficiency of the PDS in the Netherlands affects the system throughout the EU. It is argued that the system is broadly effective in achieving the target price and that since the introduction of the quota policy it has been more effective (unexpectedly) in fulfilling the EU's farm income alms. The policy has not been efficient at all times insofar as it encouraged overproduction of unwanted products with weak markets at supported prices. The policy has proved enforceable in its detail, although it has been necessary to rely on the European Court of Justice to settle difficult issues when political machinery has failed. In terms of equity the policy has strengthened the rural economy in some of the EU's more remote areas, but it has also tolerated large differences around common price levels. The author shows how the aims of policy have tended to shift over time. The largest shift has come with the 1992 General Agreement on Tariffs and Trade (GATT). which poses the biggest problem for the future of the EU dairy policy.

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